Wednesday, March 6, 2013

Recent
Congresses and the Obama Administration have taken numerous actions to promote “insourcing,”
or the use of government personnel to perform functions that contractors have performed
on behalf of federal agencies. Among other things, the 109th through the 111th Congresses
enacted statutes requiring the development of policies and guidelines to ensure
that agencies “consider” using government employees to perform functions
previously performed by contractors, as well as any new functions. The
Obama Administration has similarly promoted insourcing, with officials
calling for consideration of insourcing in various workforce management
initiatives.

Certain insourcing initiatives of the Department of Defense (DOD), in
particular, prompted legal challenges alleging that DOD failed to comply
with applicable guidelines when insourcing specific functions. The only
court to reach the issue assumed, without deciding, that certain guidelines
were legally binding. However, other courts have not addressed this issue
because of questions about jurisdiction and standing. The parties
initially conceded that such suits were cognizable under the Administrative
Procedure Act (APA), which permits challenges to agency actions that are “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with the
law,” although the government has recently asserted that insourcing
determinations are committed to agency discretion by law and, thus, not
reviewable by the courts.

At first, there was some uncertainty as to whether the U.S. Court of Federal
Claims had jurisdiction over such suits under the Administrative Disputes
Resolution Act of 1996, or whether the federal district courts had
jurisdiction under the APA. However, most courts to address the issue have
found that the Court of Federal Claims has exclusive jurisdiction over
challenges to insourcing determinations because such determinations are
made in connection with “proposed procurements” and at least some
contractors are “interested parties.” Later, questions arose about whether
contractors who meet the statutory standing requirements (i.e., are “interested
parties”) must also meet prudential standing requirements. These
judicially self-imposed limits on the exercise of jurisdiction ensure that
plaintiffs are within the “zone of interests” to be protected by the
statutes they seek to enforce. Initially, judges on the Court of Federal Claims
reached differing conclusions as to whether prudential standing
requirements applied, although later decisions may suggest that any
prudential standing requirements that apply could potentially be easily met.
Most recently, the court has had to determine whether vendors whose
contracts have expired have standing to challenge insourcing
determinations, or whether such challenges are moot.

Other provisions of law could also potentially constrain whether and how
agencies may proceed with insourcing in specific circumstances, or limit
the activities that former contractor employees may perform after being
hired by the federal government. These include (1) contract law, under which
agencies could be found to have constructively terminated certain requirements
contracts by augmenting their in-house capacity to perform services
provided for in the contract; (2) civil service law, which would generally
limit “direct hires” of contractor employees; and (3) ethics law, which
could limit the involvement of former contractor employees in certain agency
actions.

Members of the 112th Congress enacted legislation (P.L.
112-239) that calls for the Office of Management and Budget to establish “procedures
and methodologies” for use by agencies in deciding whether to insource
functions performed by small businesses, including procedures for identifying
which contracts are considered for conversion and for comparing the costs of performance
by contractor personnel with the costs of performance by government personnel.

Date of Report: February 22, 2013
Number of Pages: 26Order Number: R41810Price: $29.95

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